Summary
EOG Resources, Inc. (EOG) filed an 8-K on July 17, 2013, primarily to disclose information regarding its price risk management activities and derivative contracts. The company anticipates a significant non-cash gain of $191.5 million for the second quarter of 2013 related to the mark-to-market of its crude oil and natural gas derivative positions. Additionally, EOG reported a net cash inflow of $68.9 million from settled derivative contracts during the same quarter. This filing provides detailed schedules of EOG's outstanding crude oil and natural gas derivative contracts as of July 17, 2013, outlining notional volumes and weighted average prices for various periods extending into 2015.
Key Highlights
- 1EOG Resources anticipates a $191.5 million non-cash gain in Q2 2013 from mark-to-market adjustments on derivative contracts.
- 2Net cash inflow from settled crude oil and natural gas derivative contracts was $68.9 million in Q2 2013.
- 3The company has extensive crude oil derivative contracts in place, with notional volumes detailed for 2013 and 2014, covering prices ranging from approximately $95 to $99 per barrel.
- 4Natural gas derivative contracts are also detailed, with volumes and prices provided for 2013 and 2014, including potential increases in notional volume due to counterparty options.
- 5The filing includes a comprehensive section on forward-looking statements and risk factors that could materially affect EOG's future results, such as commodity price fluctuations, operational execution, and regulatory changes.
Frequently Asked Questions
This 8-K filing's primary purpose is to disclose EOG Resources' ongoing price risk management activities, specifically detailing its crude oil and natural gas derivative contracts. It also provides updates on anticipated financial impacts from these contracts for the second quarter of 2013.
The $191.5 million gain is a non-cash gain resulting from the mark-to-market accounting method used for EOG's derivative contracts. This means the value of these contracts has increased on paper based on current market conditions, but it does not represent immediate cash inflow until the contracts are settled.
EOG has derivative contracts for both crude oil and natural gas that extend into 2014 and, in some cases, 2015. Many of these contracts include options for counterparties to extend or increase notional volumes under certain price conditions, which EOG has detailed in the filing.
EOG highlights numerous risks, including volatility in crude oil and natural gas prices and demand, success in acquiring or discovering reserves, the ability to economically develop its plays, the availability and cost of infrastructure (like gathering and transportation), regulatory changes (environmental, tax, derivatives), competition, accuracy of reserve estimates, and general economic and geopolitical conditions.